Which of the following statements is not true?
A)Small menu prices lead to price stickiness.
B)In the classical dichotomy,some prices are sticky.
C)In the classical dichotomy,an increase in money supply growth leads to a corresponding increase in inflation.
D)Short-run contracts lead to price persistence.
E)Imperfect information may lead to price inflexibility.

Question

Quizplus · Accepted Answer

In the classical dichotomy, all prices are flexible, and it assumes that nominal variables do not affect real variables, so prices are not sticky.

Which of the Following Statements Is Not True